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 It is often observed that directors dealings are made against the trend of the market. This is probably due to the longer term nature of directors as investors in their own company, but also due to the narrow window (before period end and after declaration of results) when directors can legally transact.

Johnson Matthey (JMAT, 1412p) are seen as vulnerable to a slowing economy in at least two ways, namely falling demand for auto catalysts, and falling precious metal prices. So the recent share purchase transactions by two non execs are worth noting.

On August 7th Chairman John Banham bought 7400 shares at 1604p, investing GBP 118k, and almost doubling his holding to 15,400 shares.

A month laster he is joined by Non exec Michael Roney, who trebles his holding in Johnson Matthey by buying 2,000 shares at 1447p by investing GBP 29,000.

On August 8th I commented on Banhams purchase, saying that I needed further directors purchases for an upgrade from ‘WEAK signal’

These are the first purchases by directors in over five years (excepting options exercise) according to the data available on Digitallook (www.digitallook.com). They follow a number of directors selling shares to pay taxes (after release of shares from the Long Term Incentive Plan) only weeks earlier.

My conclusion on this information of directors share purchases is that it is worth noting due to the size of increase in holding, as well as the $$ value. I’d like to see further purchases from other directors before turning positive (or STRONG signal) on Johnson Matthey.

Signal Strength: MEDIUM (Upgraded from WEAK signal in my comment of August 8th)

Link to July 25th Questor article ‘Platinum turns Johnson Matthey into gold’.

Sir John Banham, Chairman of Johnson Matthey (JMAT, 1600p), yesterday bought 7400 shares at 1604p, investing £119,000 and taking his holding to 15400 shares.

Is this significant as a signal for investors?

Yes:

First purchase that I can find for any director looking back to 2004.

First purchase by Banham since he was made Chairman in April 2006.

Decent size in £.

Doubles size of holding for Banham.

No:

Sole buyer. Need to see other directors following Banhams lead by investing their own hard earned $$ before I invest in JMAT.

All the previous ‘acquisitions’ by directors have been through ‘Long Term Investment Plan’ options, whereby directors exercise the options and sell off around 40% to satisfy their tax liability.

So the jury remains out, but could change if/when we see other directors buying. As it stands, this is a WEAK SIGNAL.

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